Power Finance Corporation of India

7/30/2019 Power Finance Corporation of India

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POWER FINANCE CORPORATION LIMITED

(A Navratna PSE)

We Create Possibility of a Better Tomorrow

FINANCING OF POWER SECTOR

August 18, 2009


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1We Create Possibility of a Better Tomorrow

Agenda

PFC Overv iew1

2 Indian Pow er Sector Ou t look

3 Financing of Power Sector


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Overview of PFC Set up by the Govt of India on Jul 16, 1986, as a

dedicated Financial Institution for the Power Sector

Declared as a Public Financial Institution (PFI) in 1990 Registered as an NBFC with RBI in 1997

Declared as a Mini Ratna Category-I PSE by the Govt ofIndia in 1998

Declared as a Navratna PSE by the Govt of India in Jun,2007

Authorized Capital - Rs. 2000 Crs

Paid up Capital Rs. 1147.77 Crs

Maiden IPO over-subscribed by 77 times which was arecord by any PSE

A Profit-making and Dividend-paying Company, with NetWorth of Rs. 10,790 crore & Loan Assets of Rs. 64,429crore (as on 31st March, 2009)

ISO 9001:2000 Certification for all the three Divisions ofPFC, viz. Projects, F&FO and ID&A

PFC One of the most successfully managed public enterprises

PFC Credit Ratings

RatingAgency

Rating

Domestic Ratings

CRISILAAA

(Highest)

ICRALAAA

(Highest)

International Ratings(at par with Indian Sovereign rating)

Moodys Baa3

Standard & Poors BBB-

FITCH BBB-


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Overview of PFC (contd)

Consultancy Services

PFC Consulting Limited (a wholly owned subsidiary of PFC), set up, in March 2008, to

promote, organize and carry on consultancy in related activities of PFC

Designated by Govt of India as the Nodal Agency for the development of UMPPs

Designated by the Govt of India as the Nodal Agency for the Restructured APDRP

Scheme

Designated as Principal Implementation Partner in Jun 2005 for DRUM - Joint effort

of Govt. of India & USAID to promote reforms in the Distribution Sector

Partnered with 19 Training Institutes

1066 programmes conducted & imparted training to 27,810 Power Utility Persons (March

31, 2009)

Designated by the Govt of India as the nodal agency for the implementation of

AG&SP Scheme in IX and X Plan

Appointed by the Govt of India as one of the agency for providing counter-part loan

for APDRP Scheme in X Plan


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Business Strategy

R-APDRP

Equity Funding

Continue to encourage

and promote reforms in

the power sector

Consulting Services

PFC Consulting Ltd

Renewable Energy & CDM

Consortium LendingPFC

Facilitation Group

(Power Equipment, Coal &

Gas)

Continue to grow in existing

business



Products and Services

Foreign Currency

Loans

Short Term Loans

Major Financial Products

Bill Discounting

Scheme

Equipment Leasing

Buyers Line of Credit

Debt RefinancingScheme

Rupee Term Loans

Study Assistance

Consultancy Services

Restructuring, Reform

Initiatives

Financial Management

of Resources

Risk Assessment, Project

Restructuring

Solutions for Improving

Efficiency

Developing Human

Resource Plans

Project Feasibility Studies

Information Management

Systems

Legal and Contract

Services for Power Sector

Core Business95% of Outstanding

Loan Portfolio

PFC has leveraged its

knowledge and expertise in the

power sector by diversifying its

product offering

PFC is mainly engaged in

providing traditional loans and

other non-fund based products

to power utilities



PFC Performance at a Glance

18,57322,502

31,146

69,49857,030

-

20,000

40,000

60,000

80,000

2004-05 2005-06 2006-07 2007-08 2008-09

Rs.

crore

Year

Sanctions

9,40911,681

14,05516,211

21,054

-

4,000

8,000

12,000

16,000

20,000

24,000

2004-05 2005-06 2006-07 2007-08 2008-09

Rs.

crore

Year

Disbursements

3047 3128

3928

5040

6600

0

1000

2000

3000

4000

5000

6000

7000

2004-05 2005-06 2006-07 2007-08 2008-09

Gross Income (Rs Crore)

13961265

1512

17881990

984 971 986

1207

1970

0

500

1000

1500

2000

2500

2004-05 2005-06 2006-07 2007-08 2008-09

PBT

PAT

PBT & PAT (Rs Crore)



PFCs Contribution to Indian Power Sector(March 31, 2009)

Sanction Cumulative Rs. 2,33,715 croreFY 2009 Rs. 57,030 crore

DisbursementCumulative Rs. 1,13,120 crore

FY 2009 Rs. 21,054 crore



Composition of Cumulative Loan Sanctions - Rs. 2,33,715 crore(as at 31 Mar 2009)

Project-wise (%)

Sector Mix (%)

State wise

Others include computerization, studies, buyers line of credit etc

State Sanctions

MAHARASHTRA 30,223RAJASTHAN 22,895

UTTAR PRADESH 22,283

ANDHRA PRADESH 20,106

GUJARAT 18,982

MADHYA PRADESH 16,781

HARYANA 12,352

WEST BENGAL 12,312

KARNATAKA 12,262

CHATTISGARH 11,595

DELHI 10,713

TAMILNADU 8,344HIMACHAL PRADESH 6,030

UTTARAKHAND 5,819

MANIPUR 4,776

ORISSA 4,486

JHARKHAND 3,340

PUNJAB 2,912

ARUNACHAL PRADESH 1,998

JAMMU & KASHMIR 1,870

KERALA 1,194

ASSAM 783

BIHAR 481

SIKKIM 417

NAGALAND 261

GOA 252

MEGHALAYA 209

MIZORAM 38

TRIPURA 0

Grand Total 233,715State 71.8%

Private 9.3%

Central 15.0%

Joint 4.0%

Wind &Solar 0.4%

Distribution

6.6%

R&M 3.5%

Trans 9.8%

Hydro 13.3% Thermal 56.2%

STL 8.6%

Others1.7%



Composition of Cumulative Loan Disbursements - Rs. 1,13,120 crore(as at 31 Mar. 2009)

Project-wise (%)

Sector Mix (%)

State wise


State Disbursedments

RAJASTHAN 14,422UTTAR PRADESH 13,913

MAHARASHTRA 11,933



GUJARAT 7,377

WEST BENGAL 7,143

HARYANA 7,133

KARNATAKA 6,138

TAMILNADU 5,152

UTTARAKHAND 5,100

HIMACHAL PRADESH 3,557PUNJAB 2,402

ORISSA 2,379

CHATTISGARH 1,756

JAMMU & KASHMIR 1,321

JHARKHAND 1,242

DELHI 1,212

KERALA 617

ARUNACHAL PRADESH 379

ASSAM 377

BIHAR 364

SIKKIM 285NAGALAND 259

GOA 142

MIZORAM 38

MANIPUR 4

MEGHALAYA 1

TRIPURA 0

Grand Total 113,120

State 80.3%

Private 5.4%

Central 10.1%

Joint 4.2%

Wind &Solar 0.2%

Distribution

5.9%

R&M 4.8%

Trans 11.2%

Hydro 15.7%Thermal 41.8%

STL 17.5%

Others2.9%


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Composition of Loan Sanctions - Rs. 57,030 crore(FY 2008-09)

Project-wise (%)

Sector Mix (%)

State wise


State Sanctions

MAHARASHTRA 10,907DELHI 10,000

UTTAR PRADESH 7,146

MANIPUR 4,772

RAJASTHAN 4,005


WEST BENGAL 3,528

KARNATAKA 3,522

CHATTISGARH 2,053

GUJARAT 1,612ORISSA 1,607

TAMILNADU 999

ANDHRA PRADESH 729

KERALA 538

PUNJAB 510

JAMMU & KASHMIR 365

UTTARAKHAND 243

SIKKIM 217

MEGHALAYA 208

GOA 146

HARYANA 146

BIHAR 81

HIMACHAL PRADESH 16

JHARKHAND 10

NAGALAND 7

Grand Total 57,030

State 52.0%

Private 13.8%

Central 31.8%

Joint 2.4%

Wind & Solar

0.0%

Distribution

4.4%

R&M 2.7%

Trans 6.2%Hydro 17.0%

Thermal 56.1%

STL 13.7%

Others 0.0%



Composition of Loan Disbursements - Rs. 21,054 crore(FY 2008-09)

Project-wise (%)

Sector Mix (%)

State wise


Wind & Solar

0.0%

Distribution

3.0%

R&M 2.3%

Trans 6.8% Hydro 18.9%

Thermal 52.9%

STL 16.2%

Others 0.0%

State Disbursement

UTTAR PRADESH 3,304


HARYANA 2,285


MAHARASHTRA 1,954

RAJASTHAN 1,835

TAMILNADU 1,149

WEST BENGAL 1,033

JHARKHAND 1,018

KARNATAKA 875DELHI 500

HIMACHAL PRADESH 399

CHATTISGARH 365

GUJARAT 336

UTTARAKHAND 334

JAMMU & KASHMIR 306

PUNJAB 153

SIKKIM 152

ARUNACHAL PRADESH 121ORISSA 72

GOA 38

ASSAM 36

BIHAR 9

NAGALAND 6

Grand Total 21,054

State 69.6%

Private 2.9%

Central 14.9%

Joint 12.6%

Plan wise Sanction & Disbursement by



Plan-wise Sanction & Disbursement byPFC

* Till Date

Plan No. Sanction (Rs.

Crore)

Disbursement (Rs.

Crore)

Eighth 6,502 5,077

Ninth 20,212 16,534

Tenth 84,135 51,460

Eleventh* 1,50,117 43,783


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Ultra Mega Power Projects

Designated by the Govt of India as the Nodal Agency for the development of UMPPs

Each UMPP to have a generation capacity of 4000 MW

Incorporated wholly owned subsidiary companies to act as SPVs for the projects

Subsidiaries to carry out pre-feasibility studies & facilitate tie-up of inputs, linkages and clearances

SPVs to be transferred to bidders through Tariff Based International Competitive Bidding Guidelinesissued by Govt. of India.

Tariff-based International Bidding completed

Transferred Mundra UMPP (Gujarat) to Tata Power in Apr 2007 (Rs. 2.26/ unit)

Transferred Sasan UMPP (MP) to Reliance Power Ltd in Aug 2007 (Rs. 1.19/ unit)

Transferred Krishnapatnam UMPP (AP) to Reliance Power in Jan 2008 (Rs. 2.33/ unit)

Transferred Tilaiya UMPP (Jharkhand) to Reliance Power in Aug 2009 (Rs. 1.77/ unit)

Ultra Mega Power Projects

Orissa

Integrated

Power Ltd.

Akaltara

Power Ltd.

Coastal

Andhra

Power Ltd.

Coastal

Tamil Nadu

Power Ltd.

Sasan

Power Ltd.

Coastal

Gujarat

Power Ltd.

Coastal

Maharashtra

Mega Power

Ltd.

Coastal

Karnataka

Power Ltd

Jharkhand

Integrated

Power Ltd

Pithead Projects Coastal Projects

Sakhi Gopal

Integrated

Power Co. Ltd, Orissa

Ghogarpalli

Integrated

Power Co. Ltd, Orissa

Tatiya Andhra Mega

Power Limited, Andhra

Pradesh


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Ultra Mega Power Projects (Contd.)

UMPPs in Progress:

Coastal Tamil Nadu Power Ltd., Cheyyur UMPP, Tamil Nadu

Orissa Integrated Power Ltd., Sundergarh UMPP, Orissa

Akaltara Power Ltd., Chhattisgarh UMPP

Coastal Maharashtra Mega Power Ltd., Maharashtra UMPP : Site yet to be finalised.

Coastal Karnataka Power Ltd., Karnataka UMPP: Site yet to be finalised.

Sakhigopal Integrated Power Ltd., Orissa Additional UMPP 1: Site yet to be finalised.

Ghogarpalli Integrated Power Ltd., Orissa Additional UMPP 2: Site yet to be finalised.

Tatiya Andhra Mega Power Ltd., Andhra Pradesh 2nd UMPP: Site finalised.

Tamil Nadu 2nd UMPP: Site yet to be finalised.

Gujarat 2nd UMPP: Site yet to be finalised.


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R-APDRP Scheme Govt. of India has launched R-APDRP during XI Five Year Plan as a Central

Sector Scheme with focus on actual, demonstrable performance in terms of

sustained loss reduction. The establishment of reliable & automated systems forsustained collection of accurate baseline data and the adoption of InformationTechnology in the areas of energy accounting is prerequisite for project sanction.

Proposed to cover urban areas towns and cities with population of more than

30,000 (10,000 in case of special category states)

Projects under the scheme shall be taken up in Two Parts

Part-A includes projects for establishment of baseline data & IT

applications for energy accounting/auditing & IT based consumer servicecentres.

Part-B shall include regular distribution strengthening projects.

R APDRP Scheme ( Contd )


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R-APDRP Scheme ( Contd.)

Nodal Agency

PFC to act as a single window service under the programme and providenecessary support to APDRP Steering Committee and MoP.

PFC to coordinate with various agencies/stakeholders viz. MoP, CEA,Consultants, Utilities etc.

PFC to empanel various consultants/agencies.

PFC to scrutinize & vet the DPRs for Part-A & Part-B.

PFC to recommend projects of State Power Utilities for consideration of APDRP Steering Committee.

PFC to monitor implementation against identified milestones & deliverables in

Part-A & Part-B. PFC to assist MoP in assessment of claims through TPIEA for conversion of

loans into grant for Part-A & Part-B projects.

Capacity building of utilities & awareness through workshops etc.

PFC is designated as the Nodal Agency to operationalise the

programme under the guidance of MoP.

Indian Power Sector Outlook


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ACTUAL POWER SUPPLY POSITION

Period PeakDemand

(MW)

PeakMet

(MW)

PeakDeficit/

Surplus

(MW)

PeakDeficit/

Surplus

(%)

EnergyRequ -

irment

(MU)

EnergyAvail-

Ability

(MU)

EnergyDeficit/

Surplus

(MU)

EnergyDeficit/

Surplus

(%)

2006-07 100715 86818 -13897 -13.8 690587 624495 -66092 -9.6

2007-08 108866 90793 --18073 -16.6 739345 666007 -73338 -9.9

2008-09 109809 96685 -13124 -12 774324 689021 -85303 -11

Apr-

June,2009

111066 97355 -13711 -12.3 202238 182412 -19826 -9.8

June,2009 111066 95722 -15344 -13.8 65775 59558 -6217 -9.5


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Generation Capacity AdditionsIn MW

11th Plan 12th Plan 13th Plan

Thermal 59,693 76,500 64,000

Hydro 15,627 20,000 24,500

Nuclear 3,380 3,400 11,500

Total 78,700 ~1,00,000 ~1,00,000



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Installed

Capacity in

MWRequired by

end of year

Integrated Energy

Policy 2002 by Plg.

Comm.

(August, 2006)

17th EPS by

CEA

(March,

2007)

India Energy

Outlook KPMG

(2006)

Based on XI /

XII Plan

projects -CEA(excluding

renewable and

captive)

2012 2,33,000 2,31,000 2,20,000 2,16,100

2017 3,37,000 3,00,000 3,06,000 3,24,027

2022 4,88,000 4,10,000 4,25,000 4,59,027

Estimated Investment Requirement


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Estimated Investment Requirement

(Rs. Crore)

Sector

XI Plan

(2007-12)

XII Plan#

(2012-17)

Generation 4,10,896 4,95,082

Transmission 1,40,000 2,40,000

Distribution 2,87,000 4,00,060

Others (incl. DDG, R&M, NCES,

Captive, Merchant etc.) 1,93,704

Total 10,31,600 11,35,142

#From identified schemes


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Project Cost and Means of Financing (D:E Ratio)

Strength of Promoters

Preliminary Work

Consultant/ DPR

Tie-up of inputs

-Statutory Clearances

- Land

- Water

- Fuel

-Award of Contracts

Arrangement for Sale of Power


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Identification of Risks and their Mitigation

Pre Construction: Approvals, Clearances, finalization of contracts, procurement ofland

Construction: Time and cost overruns, completion delay, adequacy of evacuation

system, forex risk, equity infusion

Post construction: Fuel supply and price, Technology risk, performance shortfall,

O&M, Offtake risk, price risk and payment risk, adequate insurance cover Regulatory Risks: Regulations for the power sector are still evolving. While the EA

2003 laid out a comprehensive framework, it is likely that the implementation of some

of its elements would continue to be delayed or get distorted due to market

inefficiencies. For example, open access is still not a reality in most states. In the few

states in which it has been implemented, it is not realising its potential due to the high

incidence of wheeling and cross-subsidy charges. But if shortages worsen, importantrules governing the sector could also change.


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Issues Project Related

Reasonableness of Cost

Competitive price necessary for lower cost of generation to reduce offtakerisk

Cost benchmarks for new technologies

Promoter Strength

Capability of the promoters to bring in the required equity/ upfront equity and

take care of unexpected occurrences


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Tie-up of all Project Inputs

Statutory Clearances: Delays in obtaining approvals/forest clearance etc.

Land: Procedural delays in land acquisition, obtaining right of way, R&R

issues

EPC/ Package Contracts

Award of Contracts to reputed suppliers/ contractors

Pricing: Firm price, provision for escalations

Experience of the contractor for the technology being used

Guaranteed Performance Parameters

Adequacy of Liquidated Damages


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Fuel Supply & Pricing

Availability

- Shortage of coal and gas

- Policy of providing coal linkage for only 70% of the installed capacity for

new coastal projects

Pricing- Uncertainty and volatility in fuel prices

- Mines are not identified at time of awarding of LoA, therefore landed cost

and quality of coal cannot be accurately determined.

Imported fuel: Lack of long term contracts, volatility in price

Captive Mine: Adequacy & Effective plan for mine development

Transportation:Adequacy of infrastructure - rail, road, ports


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Sale of Power

Off-take is not fully tied up, at the time of approaching lenders (appraised onthe basis of the cost of generation of the project i.e. whether the project is

generating power at competitive rates)

Long term PPA with a fixed, committed tariff: Often these projects would

have been secured through aggressive bidding with limited cushion for any

overruns. Merchant: Due to attractive tariffs expected for merchant power, IPPs are

unwilling to enter into long term PPAs for entire power before approaching

FIs/banks for financial assistance. Building cash flow projections in such a

scenario is difficult due to uncertainties in pricing. This leads to inadequate

comfort for Bank/FIs while sanctioning these projects. Trading Companies: Lack of back to back PPAs & payment security

mechanism

Financial health of purchasers & Payment Security


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Issues Miscellaneous

Prudential Norms

Under RBIs prudential norms, NBFCs like PFC and REC are required tomaintain a capital-to-risk weighted asset ratio (CRAR) of 12%. It is expected

that CRAR requirement for government-controlled power sector NBFCs may

be temporarily brought down to 9% level (at par with commercial banks) and

help them release an additional Rs 36,000 crore to fund 11th Plan power

projects.

Liquidity would also be ensured for the power sector with banks raising their

exposure caps for the power sector NBFCs. The current prudential norms

prescribed by RBI restrict banks to lend 20% and 50% of the capital funds to

single borrower and group borrower respectively.


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Financing of UMPPs

Requirement of funds for each UMPP in the range of Rs. 16,000 -18,000Crore

Assuming D:E ratio of 75:25, requirement of debt in the range of Rs. 12,000

13,500 crore each

Equipment Suppliers

Delays and non sequential supplies/erection by suppliers/contractors, Delay

in tie-up of super critical technology by indigenous manufacturers

Manufacturing Capability of Main Plant and Balance Of Plant Equipment to

be commensurate with capacity addition.

Adequate Construction and Erection Agencies


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Matching Investments in Transmission & Distribution

Procedural delays in land acquisition, obtaining right of way, approvals,forest clearance etc.

Restricted portfolio of private players

Augmentation of transmission system to match the upcoming generation

capability in future.

Transmission capacity to be enhanced to cater to Merchant Power Plants

and Renewable energy sources.


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THANK YOU

Documents

Power Finance Corporation of India